November 1 begins the start of new rules for short sales which has consolidated the process into one new streamline program easier to execute, faster and includes lender requirements to respond to short sales within 30 days of the offer, provide weekly updates and communicate final decisions within 60 days of receipt of offers.
No longer will borrower need to be in default to qualify for a short sale if their mortgage is backed by Fannie Mae or Freddie Mac as long as they have hardship such as death of a borrower or co-borrower, divorce, legal separation, illness, disability or distant employment transfer.
Deficiency judgements (balance between short sale and owed amount) may be eliminated with some funds paid at closing. Military borrowers are not required to pay funds to negotiate the elimination of deficiency judgements.
Servicers working with Fannie Mae and Freddie Mac will be able to skip a step when attempting to get a short sale or deed-in-lieu of foreclosure approved by the elimination of approval by mortgage insurer as part of the process and according to the new standard delegation agreements.
“Short sales and deeds-in-lieu are important tools to prevent foreclosures and help struggling borrowers,” said Leslie Peeler, SVP of national servicing organization at Fannie Mae. “These delegation agreements create an even more streamlined process that will ultimately help more families avoid the costly effects of foreclosure and benefit taxpayers. We are pleased that the mortgage insurance companies have stepped up to the plate with us to help more homeowners.”
Should a borrower not make a 20 percent downpayment, the borrower is then required to have a mortgage insurance. Agreeing to the terms are the following mortgage insurers: CMG Mortgage Insurance Company; Essent Guaranty, Inc.; Genworth Mortgage Insurance Corporation; Mortgage Guaranty Insurance Corporation; PMI Mortgage Insurance Co.; Radian Guaranty Inc.; Republic Mortgage Insurance Company; Triad Guaranty Insurance Corporation, and United
- — Photo Courtesy of bakersfieldcahomes.com —
Zillow’s analysis reports that it is a Seller’s market as the housing inventory shrink additionally making it hard for the first time buyers.
“First-time homebuyers are being squeezed out of the market by falling inventory and the rapid influx of investors looking to buy basic homes to rent out to the growing population of people who have recently been foreclosed upon,” said Stan Humphries, Zillow chief economist, in a release Thursday. “Investors are paying in cash and can close sooner, which is more favorable to banks and homeowners looking to sell.”
Sellers may begin to have the upper hand in the market as housing inventory shrinks, leaving first-time homebuyers left to compete with investors, a report from Zillow revealed
In Bakersfield, the new home buyer has a better chance. Svenja Gudell, senior economist at Zillow in California’s other metro areas, investors “leave first-time buyers in the dust,” she said.
“It could be they’re not the types of homes people are looking to rent, so investors won’t buy them,” said Gudell. She said that there were a lot of foreclosures because at one point Bakersfield was overbuilt The foreclosures have resulted in properties that are not in great shape and not as desireable.
In all areas of California besides Bakersfield, the bottom tier commonly sought by first-time buyers had the greatest drop. The bottom tier is defined as homes costing less than $88,200.
But Scott Tobias, president of the Bakersfield Association of Realtors, said it’s still a struggle for first-time buyers to find a home and beat out investors. On average, it takes about six months for first-time buyers to find a house, he said.
“They get very frustrated,” Tobias said. “They place offer after offer. They’re competing with investors.”
Even though Tobias says that its still hard to find properties he notes that Investors are buying up anything less than $148,050, he said. It’s only once properties hit $200,000 that there’s more inventory available.
The new Shortsale guidelines from Fannie Mae and Freddie Mac will make it easier for sellers who previously did not qualify and eliminate previous problems in the past including remedy for the 2nd lienholder and not having to prove hardships.
“Short sales have become an increasingly important tool in preventing foreclosures and stabilizing communities,” said Leslie Peeler, senior vice president, National Servicing Organization, Fannie Mae. “We want to help as many homeowners avoid foreclosure as possible. It is vital that servicers, junior lien holders and mortgage insurers step up to the plate with us. These new guidelines will open doors to help more homeowners qualify for short sales, remove barriers to completing short sales, and make the process more efficient for homeowners and servicers.”
Shortsale process is now open to non default borrowers who may face hardship death of a borrower or co-borrower, divorce or legal separation, illness or disability or a distant employment transfer starting November 1, 2012 when the new short sale guidelines making it easier for eligibility.
“The streamlined short sales process will definitely help homeowners,” says David Liniger, Re/Max International chairman and co-founder.
“A lot of sellers and their Realtors have not been able to sort out the problems with short sales and have given up on the process because, even after sending in the correct paperwork, they have sometimes waited three or four months for their lender to respond,” Liniger says.
Servicemembers who need to relocate qualify for a shortsale. They no longer have to pay remaining deficiency after a short sale and will automatically be qualified for short sale even if they are current in payments. Provisions were also created for military personnel with Permanent Change of Station (PCS) orders.
One major barrier that is also being addressed is the issue with second lien holders. The second lien holder have caused a substantial percentage of short sales failures. To prevent second lien holders from stalling the short sale process, the GSEs will offer up to $6,000.
In addition, all servicers will have the authority to approve and complete short sales that follow the requirements without first going to the GSEs for approval. And the GSEs will also waive their right to pursue deficiency judgments.
“These new guidelines demonstrate FHFA’s and Fannie Mae’s and Freddie Mac’s commitment to enhancing and streamlining processes to avoid foreclosure and stabilize communities,” said FHFA Acting Director Edward J. DeMarco in a statement. “The new standard short sale program will also provide relief to those underwater borrowers who need to relocate more than 50 miles for a job.”
Additional Relating Reading:
FHA loan foreclosure “starts” increased for the second quarter 2012. The older foreclosures have been processed through the market but now because of the mortgage settlement, mortgages that were late some time ago are only now starting the foreclosure process.
To move through the new foreclosure short sale offers policies enacted this summer by Fannie Mae and Freddie reduces the short-sale timeline process to expedite the pre-foreclosure sale process to include short sale offers. Servicers are “encouraged” to follow these requirements with respect to mortgage loans sold to either Fannie or Freddie, including FHA, VA and USDA loans they may have purchased.
Last month another bill was introduced to assist with the short sale process. The bill addresses one of the major road blocks to closing short sale offers and that is the problem with non cooperating secondary lien holder.
Rep. Jerry McNerney (D-Stockton) introduced a bill to speed up the short sale process by requiring subordinate mortgage lien holders to make a decision on a short sale within 45 days.
The bill called “Fast Help For Homeowners (FHFH) Act” has full support from the National Association of Realtor. The NAR stated that its members continue to report delays in completing short sale transactions due to drawn out response times for whether or not an offer was accepted by the secondary lien holder.
“Second mortgage lien holders frequently hold up and cancel the short sale transaction while trying to collect the largest possible payout in exchange for releasing the homeowner’s lien, even though the secondary lien holder often gets nothing if the home ends up going into foreclosure,” said NAR President Moe Veissi, in a statement. “While efforts have been made to improve primary lien holders’ response times, issues still abound with second and subsequent lien holders, and this legislation is a step in the right direction.”
- — Photo Courtesy of http://cocoa-foreclosure-defense.com/ —
“The dam may not burst in the next 30 to 45 days, but it will eventually burst, and everyone downstream should be prepared for that to happen — both in terms of new foreclosure activity and new short sale activity,”Brandon Moore, RealtyTrac’s CEO.said in a statement.
The dam that will burst because of the postponed foreclosures that banks were hesitant to proceed with during the robo-signing investigation on fradulent foreclosure documentation. Lenders hit the pause button on foreclosures because they “were afraid that anything they did would be under a microscope,” said Eric Higgins, a professor of business at Kansas State University.
The majority of the delayed foreclosure processing were in the states that have “judicial foreclosures”. The bankers with mortgages in these states bank stopped filing foreclosure if they were not 100% sure the documents were correct and could stand up in court.
Some homeowners who were in default but did not receive their foreclosure notices were stuck in limbo during the robo banking investigations. They like many in Las Vegas abandoned their homes when there was no bank communication and they were not able to get answers and only reached the automated voicemail endless loop at their banks.
Many others stopped paying their mortgage and remained in their home especially when the banks could not provide any further status of their foreclosures or when their mortgage was sold from one bank to another and their accounts were lost in the shuffle.
Others just squatted and did not pay for many months and years. In Florida, the average time was 861 days, and in New York it was 1,056 days — close to three years.
But now the regulators have come to a $26 billion settlement with the banks to include Bank of America, JPMorgan Chase, Citibank and Wells Fargo . which means that inventory which has been lacking in the market have been showing up in the market now as potential short sales and foreclosure properties and the flow of foreclosures will continue back into the market now that the settlement is in place.
Already for the month of August new foreclosure “starts” has been up and hit a record highs according to the Mortgage Bankers Association.
- — Photo Courtesy of http://www.gcsagents.com —
The Consumer Financial Protection Bureau last week proposed rules to protect homeowners and to avoid problems suffered by many borrowers during the housing crisis.
“These rules are about putting the service back in mortgage servicing,” said CFPB Director Richard Cordray, on a conference call with reporters. “The bottom line is to treat consumers fairly by preventing surprises and run-arounds.” The rules provide basic protections, he added.
For instance requiring that the mortgage servicing company provide monthly statements which seems so simple but is not standard; breaking down all the numbers such as deposits, principals, interest rates, fees, due dates and warnings about new or increased fees including ARMs adjustable-rate mortgage reminders in advance.
“A lot of this stuff is common sense,” said Keith Gumbinger, vice president of HSH Associates, a publisher of consumer loan information, of the proposed rules. “You shouldn’t have to codify proper business practices. That’s not to say everyone is a bad actor. But the ones who did it wrong did it so badly, they forced the regulators’ hands on the rest of the industry.”
One of the major surprises occurs when the borrower no longer maintains property insurance and the mortgage servicer has the right to force a policy. The new law requires that forced policy process be transparent and borrower of policy payments to avoid borrower not being ready to pay the cost.
Policies and procedures will be required to be in place so borrowers are able to navigate and find assistance when they need including correcting payment issues and receiving timely payment receipt and corrected documents.
Systems will be required so that the homeowner borrower is able to easily obtain assistance and options to avoid foreclosure when they are in default. The new rules also requires review of file for loan modification and other payment plans application and response in a timely fashion restricting ability to proceed with foreclosure unless these options are applied for first.
“The inadequate performance of many mortgage servicers has helped widen the misery for many Americans,” said Richard Cordray, director of the consumer agency, in remarks to reporters announcing the proposed rules. The rules will take effect next year after a public comment period. “Right now, people have too little protection under federal law if their mortgage servicer surprises them with costly fees or gives them the runaround.”
The U.S. housing market has seen four years of lack of new homes. Since 2008 new homes construction declined steadily and it was only up until this past June 2012 we began to see reports of new housing construction applications increase.
Four years of lack of new homes coupled with the shadow and REO inventory held by the banks and the foreclosure homes many stuck in limbo because of the robo signing issues only recently starting to move again; the shortage of available housing has been substantial.
These issue skew the reports of increase of home prices as a barometer for uptrend in the housing market. The demand for homes because of loss of inventory may not reflect as much of an uptrend in the housing market, rather leaning more towards competitive bidding for the minimum inventory on market.
What may be added to that demand is the normal new families demographic but those numbers are balanced out by the number of young adults remaining at home because of the unemployment. When the unemployment numbers decrease there will added factor in housing demand.
Warren Buffet’s Berkshire Hathaways increased his holdings in Wells Fargo, the largest U.S. Homelender, and the assets of the bankrupt Residential Captial LLC.
A turn in the housing market will benefit Berkshire’s businesses tied to home building and repair, said Josh Brown, who helps oversee $350 million at Fusion Analytics Investment Partners LLC in New York, including Berkshire shares.
“Buffett has spent the past decade amassing a portfolio of companies that are involved with home remodeling,” he said in a phone interview. “It’s got the right drivers if this housing trend continues.”
Berkshire Hathaway has added approximately 36% or 104.1 million shares of Wells Fargo to its portfolio since 2008-2009. And his choice in a regional bank is a less riskier one with current big bank problems.
“Wells is seen as a supersize regional bank,” reports Wall Street Journal.”More telling, it isn’t a player in over-the-counter derivatives markets. Wells had derivatives with a face value of about $3.2 trillion at the end of last year. J.P. Morgan had $71 trillion and BofA, $68 trillion.”
When the real estate market is back on the move Warren Buffet will in the right position, again.